04: Putting Together Your Angel Investor Pitch
Preparing Your Talking Points
Elevator Pitch: An elevator pitch is designed to communicate your company’s value in the amount of time spent on an elevator ride. You must come up with a concise way to explain everything an investor would need to know to be interested in your company. Design a sixty-second pitch and test it out on friends and colleagues. It’s a great tool to have ready to take maximum advantage of a brief opportunity to talk to someone who has resources to help you.
Preparing Your Paperwork
Legal Counsel & Accountant: Make sure you hire an attorney that you are comfortable with as well as an accountant. These two new team members will become crucial when it comes to preparing and reviewing your PPMs and due diligence documents.
A Business Plan: Many people think that a business plan is old school and not needed in today’s world of PowerPoint presentations and flashy animations. This advice couldn’t be more wrong. A business plan shows investors that you put in the time to research every possible market your company can exploit and every competitor your company will contend with. It shows that you understand the financial position of your company and what it takes to establish a successful, growing business. In short, your business plan lets angels know that you know what you are doing.
Private Placement Memorandum: PPMs are disclosure documents required by the SEC for outside investors who are putting money into your company. A PPM includes your business plan along with a summary of subscription, a summary of the offering, a list of the risk factors involved, use of the proceeds, management compensation, principal shareholders and capitalization table, subscription agreement, and an actual subscription form that the angel signs. However, if all angels investing are accredited, a PPM is not required as accredited investors are exempt from the disclosure requirements under Regulation D. Please consult and attorney as this is not the only requirement needed to be met to avoid a PPM.
Realistic Investment Terms: This does not have to be a formal document, but it is crucial that you and your team discuss realistic investment terms. Individual angels often try to negotiate with a startup. Therefore, it is important to have terms that have been mapped out ahead of time to present to angels.
Due Diligence Documents: Before an angel gives you money, he or she will perform what is known as due diligence. Essentially, the angel is doing research into your startup to make sure he or she didn’t miss anything. Make sure you have the following prepared so angels can perform their due diligence without delay.
- Background of the company
- Background of the company’s management
- The company’s business plan
- Management discussion of the company performance
- Capitalization table
- Employment agreements
- Purchase or sale agreements
- Previous letters of intent